Canada Inflation Steady At 2.9% In November, Driven By Food And Gas Prices
OTTAWA - Canada's annual inflation rate remained stubbornly high at 2.9 per cent last month as Canadians continued to pay considerably more for food and gasoline than they had 12 months earlier.
Statistics Canada said Tuesday that grocery prices were up 5.7 per cent in November compared with a year ago as consumers saw double-digit increases for such basics as fresh vegetables and bread. The figures included a 1.3 per cent jump from October alone.
Overall food prices, including restaurant meals, were 4.8 per cent higher than a year earlier, the biggest such increase since July 2009, the federal agency said.
Meanwhile, gasoline also continued to be a key driver of annual inflation, rising 13.5 per cent in November from 12 months earlier.
However, gasoline price inflation is on a downward track after peaking in May at close to 30 per cent. On a month-to-month basis, Canadians actually paid 2.3 per cent less for gas in November than they did in October.
The continuing high cost of gasoline helped push the transportation component up 5.7 per cent, although that was less than the 6.7 per cent gain recorded in October.
Overall, Statistics Canada said prices rose in all eight major components it tracks and in every province in Canada, with the highest rate — 4.1 per cent — recorded in Newfoundland and Labrador.
The dollar firmed slightly on the report when it was released at 7 a.m. EST, then climbed on better news out of Europe.
"I think inflation may have more staying power than many expect," said Douglas Porter, deputy chief economist with BMO Capital Markets.
"We have seen core inflation move higher across the industrialized world this year even with relatively disappointing growth. It's due to things like clothing prices ... food prices, and we saw some upward pressure in car prices as well."
Still, the Bank of Canada has repeatedly stressed that it is not worried about inflation even though it has remained above the bank's two per cent target for more than a year.
The bank's core inflation index, which tracks underlying price pressures by excluding volatile items such as energy and some foods, was also north of target at 2.1 per cent in November.
In its most recent report on the state of the economy, the central bank said it expects overall inflation to decline to one per cent by mid-2012 as gasoline prices continue to decline. There's little in November's report that will likely to detract from that sentiment.
Analysts are not convinced inflation will fall so sharply or so quickly. Many said they expected the trough to be somewhere between 1.5 and two per cent next summer, well north of the Bank of Canada call.
"In order for the bank's view to come to fruition, we need much, much softer global growth ... (and) a more significant commodity shock," said Derek Holt, vice-president of economics for Scotiabank.
Porter pointed out that with a month of data remaining, it looks like inflation in Canada will average about three per cent this year. That's the highest rate over a full year in two decades, he said.
Economists generally agree with the Bank of Canada that inflation will continue to moderate over the next few months as a result of lower demand for commodities, including oil, and the continuing excess capacity in the economy, which will make it difficult for businesses to demand higher prices. The difference is in the extent of the fall.
Aside from food and energy, most price increases in November were tame. Shelter costs rose 1.5 per cent, although fuel oil, which is related to the energy component, was still 24.4 per cent higher than 12 months ago. Consumers also paid 4.4 per cent more for car insurance and 3.3 per cent more for new model cars, although that was down from the four per cent price hike seen last November and a five per cent increase in 2009 during the month.
However, home mortgage and interest costs fell 1.1 per cent, natural gas declined 2.7 per cent, video equipment dropped 12.4 per cent, women's clothing slimmed by 2.1 per cent and furniture cost 2.1 per cent less.
On a month-to-month basis, inflation was a tepid 0.1 per cent in November from October, the agency said.